The area along Route 156 is called "mixed-use" zoning, where residential and commercial uses are allowed. The law is set up with planning board oversight, with the aim to sustain the historic qualities of the district.
The land is currently zoned Residential R15 and Residential R40, and would need to be re-zoned to Planned Unit Development — which can exceed zoned density requirements — in order for the project to go forward.
What's old is new again. Walkable communities, where businesses and homes are clustered together, can thrive again with proper zoning. The Knox Town board should approve a business district in the hamlet.